So just exactly what is the suggested defense mechanism? And, for that matter, just what is the anticipated failure mechanism? It is already given that we have defense against lightning strikes, which happen all of the time. So how about some description of the exact actions of this menace. OR, is it some "Phantom Menace" that we must defend against, similar to that Y2K event that took out all of our computerized every-things. OR perhaps it didn't perform quite as advertised.

Indeed. In August 1859 a large CME caused a very bright aurora that "turned night into day" in Panama. Telegraph communications were impossible accross America and Europe for nearly two days. Sooner or later, we WILL again take a direct hit from a large CME. It wasn't a great diruption in 1859, when telegraph machines used hand operated mechanical switches, but it will be a huge disruption now.

Of particular concern for the grid is the large transformers on it. Lead times for these right now are in the region of months - and we are not facing the grid being down at the manufacturing plants concerned.
Imagine an event happening early January taking out 20 of these across the USA or Europe.
I have a 5kW generator for the house that runs of the gas utility - who knows if that would still be able to be supplied though?

Unfortunately, a vulnerabilty is often ignored until an event happens. There is no economic incentive to design products for this even though IEC test standards exist http://www.emcs.org/acstrial/newsletters/winter08/hpem.html and test equipment is available http://www.apelc.com/system4.html.
The EMP Commission Chairman has a good summary at
http://images.military.com/DT/images/Graham.pdf

The EMP electric field is often specified as 30kV/m for times measured in seconds. This means that a typical USB port will see 300 Volts applied between GND and Vcc, because they are about 10mm apart. Will it survive this potential?

Remember that if you were say a terrorist on US soil that smuggled in a missile with a nuclear warhead, you would only need to launch it vertically to the correct height which would take a few minutes. In that time frame there could be no response from the military.

In conjunction with unveiling of EE Times’ Silicon 60 list, journalist & Silicon 60 researcher Peter Clarke hosts a conversation on startups in the electronics industry. One of Silicon Valley's great contributions to the world has been the demonstration of how the application of entrepreneurship and venture capital to electronics and semiconductor hardware can create wealth with developments in semiconductors, displays, design automation, MEMS and across the breadth of hardware developments. But in recent years concerns have been raised that traditional venture capital has turned its back on hardware-related startups in favor of software and Internet applications and services. Panelists from incubators join Peter Clarke in debate.